1975: Challenging Presidential Authority to Impose Tariffs

What can an American President do when faced with conditions he or she sees as a threat to the national economy? Can the President impose tariffs to achieve an economic objective? Can the President find that tariffs are an appropriate means of addressing economic conditions that present a threat to national security? These familiar questions were addressed in 1974 and 1975 in litigation challenging the so-called Nixon Shock of 1971. Barnes, Richardson & Colburn partners J. Bradley Colburn, Earl R. Lindstrom, E. Thomas Honey, Rufus E. Jarman, and David O. Elliott brought the case on behalf of a Yoshida International, Japanese manufacturer and importer of zippers.

The Customs Court decision is published at 378 F. Supp. 1155 (1974).

The genesis of the Nixon Shock was increasing inflation in the U.S. To address that concern, President Nixon imposed a number of economic measures including a freeze on wages and prices and an across-the board surcharge of 10% on imported merchandise.

The Constitution vests the power to regulate trade in the Congress, not the President. Specifically, Article I authorizes Congress “To regulate commerce with foreign nations, and among the several states, and with the Indian tribes . . . .” Congress can also “lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States . . . .” Thus, any authority for the President to impose tariffs must come from a Congressional delegation of authority to the President. The question presented in Yoshida was whether President Nixon had the legal authority to impose the 10% surcharge.

The Customs Court, which was the predecessor to today’s Court of International Trade, considered the question in light of two separate statutes. First, the “termination authority” delegated to the President as part of the Trade Expansion Act of 1962. This is the same law that is at the heart of today’s controversy surrounding tariffs on steel and aluminum products. The Court also considered whether the Trading with the Enemy Act granted the necessary authority to the President.

The Court concluded that the President acted pursuant to the termination clause of the Trade Expansion Act. However, the scope of authority granted the President was limited to terminating existing proclamations relating to trade. That grant did not also give the President the power to unilaterally set new rates of duty. According to the Court:

[N]either need nor national emergency will justify the exercise of a power by the Executive not inherent in his office nor delegated by Congress. Expedience cannot justify the means by which a deserving and beneficial national result is accomplished. To indulge in judicial rationalization in order to sanction the exercise of a power where no power in fact exists is to strike the deadliest of blows to our Constitution.

The appeal to the Court of Customs and Patent Appeals, predecessor to today’s Court of Appeals for the Federal Circuit, did not go as well for Yoshida. On appeal, the Court focused on the Trading with the Enemy Act (“TWEA”).

Under TWEA, the President may declare a national emergency and during the period of the emergency, may “regulate,” by means of instructions, licenses or otherwise, the importation of property in which any foreign country or national thereof has an interest and take any other further measures. The Court saw the TWEA as giving the President broad powers to act not just in times of actual armed conflict but in response to economic emergencies or “any national emergency declared by the President.” The Court held, therefore, “that Congress, in enacting . . . the TWEA, authorized the President, during an emergency, to exercise the delegated substantive power, i. e., to ‘regulate importation,’ by imposing an import duty surcharge or by other means appropriately and reasonably related . . . to the particular nature of the emergency declared.”

The remaining question was, therefore, whether the surcharge was appropriately and reasonably related to the emergency at hand. The Court noted that the surcharge was limited in several ways. First, it only applied to items for which the U.S. had made prior trade concessions. Second, the maximum amount of the surcharge on an item was set at the column two statutory rate, meaning the effective rate had been set by Congress (although subsequently reduced by international agreement). Furthermore, the surcharge was intended to offset the actions of trading partners that had eroded the U.S. favorable balance of trade. Curtailing imports by making them more expensive was, therefore, reasonably related to the the nature of the emergency.

In conclusion, the Court of Appeals held:

Congress, fully familiar with its own use of duties as a means of regulation, delegated to the President, in § 5(b) of the TWEA, the power to regulate importation during declared national emergencies by means appropriate to the emergency involved. Interpreted as having authorized the President's imposition of the specific surcharge in Proclamation 4074, as a reasonable response to the particular national emergency declared therein, the delegation in § 5(b) of the TWEA passes constitutional muster.

Accordingly, the President's action under review was within the power constitutionally delegated to him, and the judgment of the Customs Court that said action was ultra vires must be reversed.

Thus, the victory Barnes, Richardson & Colburn earned for Yoshida was short lived. Nevertheless, the case remains pertinent today and helps in some way to frame the discussion of presidential authority over tariffs that is presently working its way through the courts.